Both the World Bank and IFC offer Green Bonds to support climate-related projects.
The World Bank Green Bond raises funds from fixed-income investors to support World Bank lending for eligible projects that seek to mitigate climate change or help affected people adapt to it. The product was designed in partnership with Skandinaviska Enskilda Banken (SEB) to respond to specific investor demand for a triple-A rated fixed-income product that supports projects that address the climate challenge. Since 2008, the World Bank has issued more than $6 billion in Green Bonds through 65 transactions and 17 currencies. Green Bonds are an opportunity to invest in climate solutions through a high-quality credit fixed-income product.
The IFC Green Bond program supports one of IFC's strategic priorities: to develop and promote innovative financial products that attract greater investments to climate-related projects. To date, IFC medium-term Green Bonds have raised more than $2 billion. The proceeds of the bonds are set aside in a separate account for investing exclusively in renewable energy or energy-efficient projects and other climate-friendly investments in developing countries. IFC's bonds go to fund its climate-related business, which is a growing area of strategic importance for the Corporation.
World Bank Guarantees
Bank guarantees help member countries mobilize private financing for development purposes. All Bank guarantees are partial so that risks are shared between the Bank and private financiers. The Bank's objective is to cover risks that it is in a unique position to bear, given its experience in developing countries and its relationships with governments. Bank guarantees are provided as Development Policy Financing or Investment Project Financing.
By covering government performance risks that the market is not able to absorb or mitigate, the World Bank's guarantee mobilizes new sources of financing at reduced financing costs and extended maturities, thereby enabling commercial and private lenders and investors to invest in projects in developing countries. Guarantees can mitigate a variety of critical sovereign risks and effectively attract long-term private investment and commercial financing in sectors such as power, water, transport, telecommunications, oil and gas, and mining. Guarantees can also enhance private sector interest in participating in privatizations and public-private partnerships. It can also help governments access the financial markets.
The Bank's presence in transactions is seen by investors as a stabilizing factor because of the World Bank's long-term relationship with the countries and policy support it provides to the governments. The World Bank guarantees help catalyze the private financing needed in emerging countries, which leads to greater job and income opportunities for people and therefore contributes to the achievement of the Millennium Development Goals' overall challenge of reducing poverty.